IHC Homes Investment Opportunity

Homes Business – Investment Opportunity Summary

Iron Horse is offering investors the opportunity to purchase manufactured homes to be installed and leased to tenants in Iron Horse owned and operated communities.

Each home will be occupied by a qualified, thoroughly underwritten leaseholder tenant that has made a significant payment for an option to purchase the home at several pre-designated strike prices over the duration of the term. The majority of tenants enter a lease option with a 12 year term and exercise their option in the 11^th year of the lease. Tenants make monthly home payments for the duration of the lease period and are responsible for all maintenance and repairs of their homes after the initial home warranty period has elapsed.

Iron Horse Communities manages all aspects of installing and marketing homes, screening tenants, collecting payments, enforcing evictions, and all other ongoing community operations through its management organization, Iron Horse Management. There is no burden on the home investor to manage tenants. Iron Horse Communities also publishes and distributes financial reporting to all home investor entities monthly.

Investors in manufactured homes within Iron Horse owned communities benefit from stable cash flows generating attractive returns and significant tax benefits via accelerated depreciation or the ability to invest through tax deferred or exempt retirement accounts. In addition, Iron Horse Communities further mitigates risks to investors by suspending lot payments for any homes where delinquencies do occur.

Details

Manufactured homes, like automobiles, are classified and titled as chattel or personal property. Just as lenders have been offering a lease-to-purchase option agreement on autos, Iron Horse Communities is offering similar lease-to-purchase financing for manufactured home buyers.

Thanks to industry experience, established relationships with manufacturers, and volume purchasing power, Iron Horse Communities purchases and fully installs homes on lots for an average cost of $65,000 for single-section homes and $80,000 for double-section homes. The retail value of these homes is fifteen to twenty percent higher than our costs and we do not mark-up the cost of the homes to investors or tenants. This margin vs retail price provides additional security for the home investor.

We offer a lease option home ownership program to new residents in our communities. This program requires residents to make an up-front option payment on their home, with the standard amount being 10%. The option payment represents a financial commitment by the tenant / leaseholder in their new home and creates additional security for the home investor: the investor’s cost basis in the home is significantly lowered early in ownership, and the tenant / leaseholder has submitted a meaningful deposit and therefore has a strong incentive to maintain the home and make regular payments to not risk losing the value of that option payment. As a result, lease defaults are extremely rare. Our tenants enjoy pride of home ownership and often enhance the value of their homes.

Investment Channels

Iron Horse can accept home investments through two channels:

1. Direct Investment

Either personally or through an investment entity, investors purchase homes directly from the manufacturer and hold the title to those homes. See our Home Cost Matrix for more detail on average cost of a new manufactured home. Investors sign a management agreement which defines the manager role and assigns the associated responsibilities to Iron Horse Management. Under this arrangement, Iron Horse Management is responsible for all marketing, leasing, collections of payments from tenants, disbursements of payments to investors, and all tenant communications. In return, Iron Horse Management receives a fee of 5% of collected monthly home payments.

After homes are purchased by investors and installed in an Iron Horse Community (generally 2 months after purchase), they are lease-optioned to tenants for a 12-year term with a 10.5% factor. Including the value of an upfront 10% option payment made by the tenant, Direct investors should expect to receive an unlevered 11% IRR over the duration of the investment. In addition, direct investors benefit from the ability to take accelerated depreciation on owned homes that can be used to offset passive income derived from other sources and reduce tax burden.

2. Home Lending Program

The home lending program is an opportunity for investors to lend for ten years on a portfolio of new manufactured homes owned by Iron Horse Communities that are already being leased to tenants with an option-to-purchase.

These loans pay nine percent (9.0%) interest, with monthly payments of interest and principal. A recorded first lien on each of the homes covered in the loan program secures the loan. Investors can participate in the home lending program via self-directed retirements funds to take advantage of tax exempt and tax deferred benefits. See our Home Lending Program FAQ for more information

Next Steps

Interested investors should reach out to the Iron Horse Communities team at investors@ihprop.com discuss any questions, current needs for homes investment in Iron Horse Communities, and next steps.

Chattel Home Lending Opportunity

The opportunity is to lend for ten years on a portfolio of new manufactured homes, yielding unleveraged returns of nine percent (9.0%) with payments of principal and interest paid monthly.

Each of the houses has a qualified, thoroughly underwritten leaseholder tenant that has made a significant payment for an option to purchase the home at the end of the eleventh year of their lease for a set price.

Description

Manufactured homes, like automobiles, are classified and titled as chattel or personal property. Just as lenders have been offering a lease-to-purchase option agreement on autos, Southern Alliance Homes LLC (SAH) is offering similar lease-to-purchase financing for manufactured home buyers.

Due to industry experience, connections and volume purchasing power, each new single-section home fully installed on a lot cost about $48,000 on average and each new double-section unit fully installed cost on average $61,000. The retail value of these homes is fifteen to twenty percent higher than our costs, since we are buying direct from the factory and are not marking-up the cost of the home.

This provides additional security protection for the Lender on the homes. New residents to the community make an up-front option payment on their home ranging from 8% to 15% of the cost of the home, with the standard amount being 10%. This option payment creates a financial commitment by the Tenant/Leaseholder in their new home and is the first step towards homeownership.

Benefits of our lease to purchase home program

With our established lease to purchase home program, we can deliver benefits to the manufactured home community owner and the home lender investor:

A recorded first lien on each of the homes covered in the loan program secures the loan.
Leasehold tenants reimburse the insurance and taxes on the home to the home ownership entity (“SAH”) monthly. This allows SAH to ensure that the taxes and insurance are paid on a timely basis.
Once the initial home warranty period has elapsed, the leaseholder tenant pays for all maintenance and repairs. The leaseholder cannot move the home, since the title is in the name of the home ownership entity.

All homes are owner-occupied, no subleases allowed.
Our tenants enjoy pride of ownership and often enhance the value of their homes.
Lease defaults are rare, and historically the default rates have not exceeded 2%, however, the default rate is even lower when backed by a guaranty of the park/community where the home is located.
Management of the tenant is done by the park management team, and therefore relieves burden from the home lender.

Opportunity

SAH is seeking loans from Investors/Lenders of at least $100,000 to finance homes already owned by SAH that are currently under leases with an option-to-purchase in Belleglade MHC in Clarksville, TN. These loans will pay nine percent (9.0%) interest, with monthly payments of interest and principal.

Monthly payments on a $100,000 loan amortized over ten years will equal $1,266.76 per month.

Scale

SAH anticipates a need for an additional $400,000 in capital each quarter for the next three years, for a total capital need of approximately $6,000,000.

And, this is just to meet the need in our Clarksville, TN community.

SAH and its affiliated park ownership entity, Iron Horse Interests, is actively seeking other park ownership opportunities in the Southeastern U.S. that will have requirements for new homes.

Testimonials

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What our Investors/Lenders say about their investment with SAH – Interview with one of our previous Investors with SAH.